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There are times in one’s life when it becomes obvious that they aren’t a child anymore. Realizing the importance of financial planning is one of those instances. It can seem like a monumental task, but it doesn’t have to be. 

If you need a car to get to and from your job, then you have to consider the most cost-effective way of doing that. Otherwise, you risk a ripple effect that could ruin your whole budget. Here’s why car leasing can make life much easier for you regarding financial planning. 

Lower Monthly Costs

When you lease a car, you pay the dealership a set amount each month. The same thing happens when you buy it, but it’s a loan. That loan can translate to a higher bill each month, which can wind up being a hardship for some. 

Inspections and Repairs

Part of leasing a car usually includes the dealership handling maintenance issues like yearly inspections and oil changes. You’ll also likely pay a discounted cost for things like having your tires rotated, though that can be free depending on the lease. When you buy your car, you usually have to pay for those sorts of things out of pocket.  

Trade-In Value

When you buy a car, it starts depreciating the second you drive it off the lot. That means you’re not going to get the same value back. When you’re leasing the car, that becomes the dealership’s concern, and they can do things to improve the value again before putting it back on the used car market. That means you’re not going to be worried about losing money later. 

The Total Cost

When you’re weighing the total amount of money that you’re going to spend when you lease a car versus buying it, it usually tilts in favor of leasing. You could reasonably expect to save more than $2,000 in the long run. That’s cash that could be invested elsewhere or used for purchasing something else or even paying off some other bills. 

Of course, it’s nearly impossible to find something that gets a 100% consensus. There are those who think that owning a car is a better investment. It’s basically the same type of argument that people use to say that buying a home is better than renting. Ultimately, it comes down to what you can afford both in the long- and short-term.

Also, when you’re leasing a car, there is a limit to what kind of modifications you can have done on it, since it could affect the resale value when the lease is up. When you buy your car, you don’t have that concern. That’s usually not a dealbreaker for people since they just want to have the vehicle for the sole purpose of driving it and not add anything fancy. 

How Car Leasing Can Simplify Your Financial Planning: A Singapore Case Study

Meet Sarah: A Young Professional in Singapore

Sarah is a 28-year-old marketing executive living and working in Singapore. She’s been in her job for three years and feels it’s time to get a car. However, like many young professionals, she’s cautious about her finances. She wants to balance her desire for a car with her other financial goals, like saving for the future and maybe even a home.

Sarah’s Car Dilemma

Sarah has been looking at a popular mid-range sedan that costs about S$100,000. In Singapore, where car prices are among the highest in the world, this is considered a modest choice. Still, it’s a huge amount of money for Sarah.

If she buys the car outright, she’ll need to:

1. Pay a 30% down payment of S$30,000
2. Take a car loan for the remaining S$70,000
3. Pay this loan back over 7 years with interest

Sarah is worried about tying up so much of her money in a car. She’s heard that cars in Singapore depreciate quickly due to the 10-year COE (Certificate of Entitlement) system. Plus, she’s not sure if she’ll need the same type of car in 5-7 years as her life circumstances might change.

Discovering Car Leasing

Sarah’s colleague suggests she look into car leasing. At first, Sarah is unsure – isn’t leasing just renting? But as she learns more, she realizes it might be a smart financial move.

How Leasing Works for Sarah

Sarah finds a leasing company offering the same model she likes. Here’s what her lease looks like:

• Lease term: 3 years
• Monthly payment: S$1,500
• Mileage limit: 20,000 km per year (more than enough for her needs)
• Includes: Road tax, insurance, and maintenance

Benefits Sarah Discovers with Leasing

1. Lower Upfront Costs: Instead of a S$30,000 down payment, Sarah only needs to pay a security deposit of S$3,000, which she gets back at the end of the lease if the car is in good condition.
2. Predictable Monthly Expenses: Sarah knows exactly how much she’ll pay each month. There are no surprise repair bills or fluctuating loan interest rates.
3. Included Maintenance: The leasing company handles all regular maintenance. Sarah doesn’t have to budget extra for servicing or worry about where to take the car.
4. Easier Budgeting: With fixed costs, Sarah can easily factor her car expenses into her monthly budget. This helps her plan for other financial goals, like saving for a home down payment.
5. Flexibility: After three years, Sarah can choose to lease a new car if her needs change. Maybe she’ll want something bigger, or perhaps a more eco-friendly option.
6. No Depreciation Worries: In Singapore, where car values can drop significantly due to the COE system, Sarah doesn’t have to worry about selling a car for much less than she paid.
7. Up-to-Date Car: Leasing allows Sarah to drive a newer car with the latest safety features and technology, which is important to her.

The Financial Impact

Let’s break down the numbers:

Buying:

• Down payment: S$30,000
• Monthly loan payment (estimated): S$1,200 for 7 years
• Insurance, road tax, maintenance (estimated): S$500 per month
• Total monthly cost: S$1,700
• Total cost over 3 years: S$91,200 (plus the car’s depreciated value)

Leasing:

• Security deposit: S$3,000 (refundable)
• Monthly lease payment (all-inclusive): S$1,500
• Total cost over 3 years: S$57,000

Sarah’s Decision

After comparing her options, Sarah decides to go with leasing. Here’s why:

1. She keeps more of her savings, which she can invest or save for other goals.
2. Her monthly car expenses are lower and more predictable.
3. She has the flexibility to change cars in three years if her needs change.
4. She doesn’t have to worry about selling the car or its depreciation.

The Outcome

Two years into her lease, Sarah is happy with her decision. She’s been able to:

• Enjoy the convenience of having a car
• Maintain a stable monthly budget
• Continue saving for her other financial goals

Sarah has even started putting the money she saved on the down payment into her retirement fund and a savings account for a future home down payment.

Conclusion

For Sarah, car leasing turned out to be a smart way to simplify her financial planning. It allowed her to enjoy the benefits of having a car without the long-term financial commitment of buying. In a place like Singapore, where car ownership is expensive and values can change quickly, leasing offered Sarah a flexible, predictable, and financially manageable solution.

Remember, while leasing worked well for Sarah, it’s important for everyone to consider their own unique financial situation and needs when deciding between leasing and buying a car. What works best can vary from person to person, but for many in Singapore, leasing can be a practical way to simplify financial planning and enjoy the benefits of having a car.

By using the above reasoning and by making sure that you watch your other expenses, you can have an excellent car on a regular basis and also save on things like maintenance and auto inspections. As a result, you can build the rest of your budget around that. Then you can have a much simpler life.